Construction of the Suburban Rail Loop will continue if the Coalition wins the state election, despite its repeated commitment to “pause and review” the project, amid revelations it would cost at least $1 billion to stop work.
Before the third consecutive election in which the $33.5 billion underground line is a key issue, The Age can reveal a briefing note provided to the state government in recent months estimated anything other than a minor pause would cost $1 billion to $1.5 billion.
A six-month delay in the construction of SRL East – after tunnel boring machines began drilling the Cheltenham to Box Hill line last month – would hit taxpayers with a bill of between $2.2 billion and $2.7 billion. Details of the briefing note have been provided by five sources who have seen it within government, who spoke anonymously to detail documents considered confidential.
The figures have prompted the Coalition to clarify its position to pause and review the project. An opposition spokesperson confirmed drilling would continue during this process should Opposition Leader Jess Wilson claim victory next month.
The fresh fight over the SRL comes amid increased scrutiny of the fiscal plans of both major parties. The government’s latest budget update, to be released on Friday, will show its projected surpluses have been slashed as tax revenue falls because of plummeting property prices.
The Coalition’s position on the SRL had previously been interpreted by the construction industry to mean a halt to construction while contracts for the project were reviewed. But when contacted by The Age about the briefing note, the spokesperson said the policy did not mean tools down.
“The Coalition position to pause and review the SRL does not mean workers are sent home or tunnel boring stops,” the spokesperson said. “Anything that purports to cost our policy on this basis is a lie and misleading.
“The Coalition’s commitment to ‘pause’ therefore has no technical or budgetary differences to the government’s own decision not to award further SRL contracts until their own review is complete.”
Premier Ben Carroll has commissioned a technical review to find $1 billion in savings, while also delaying signing two multibillion-dollar contracts to build SRL East stations until this process is complete.
The opposition spokesperson said: “The independent Parliamentary Budget Office has assessed our policy to pause and review the Suburban Rail Loop and found it will have no impact on the state’s budget position.
“That is an independent assessment, not an anonymous estimate.
“We will not take lectures from the Labor Party, who can’t even provide an updated cost to finish the SRL, let alone pause it.”
The SRL was promised by former premier Daniel Andrews before the 2018 election, and was again a feature of the campaign in 2022. The debate is much more complex this year, given construction is now well under way and multibillion-dollar contracts have been signed.
Under former premier Jacinta Allan, one contract to build the stations was expected to be signed before the election, while another would be under way.
Since taking over as premier, Carroll has announced $1 billion in savings and committed to his technical review to save another $1 billion, while Wilson has continued campaigning on her “pause and review” promise and a commitment to be transparent about what she says is the true cost of the project.
The five sources who spoke to The Age all confirmed that the advice to government was that a pause on the project for a “material” period – considered weeks or months – would cost at least $1 billion.
Some conceded the advice was partly informed by people who had an interest in keeping the project continuing, such as Suburban Rail Loop Authority staff, but said many of the issues outlined in the document were valid.
The sources said best-practice guidelines meant tunnel boring machines should not be paused for extended periods under housing, meaning any machines under residential areas would need to continue digging until they reached an appropriate location on their route for work to stop.
There are three tunnel boring machines digging under Melbourne’s south-east, which collectively have dug 138 metres of tunnel since September. Each machine is more than 100 metres long. A fourth machine is being assembled in Clarinda and is expected to launch within months.
Contractors working on the project were still entitled keep claiming compensation even if the government ordered a suspension of works, another source said.
This was confirmed by the Victorian Auditor-General’s Office, which in its recent report on the project said: “If the state suspends the contract it is still required to pay the reimbursable costs of the contractor during the period of contract suspension.”
Exemptions apply if work is suspended because of an issue created by the contractor or if the Suburban Rail Loop Authority determines the project is running late or over budget.
Other costs of a pause include keeping safe the station sites, many of which are now large holes in the ground. There are also more than 1750 people employed across the project with entitlements and rights to compensation.
The auditor-general also outlined the cost of delays, particularly if the signing of contracts slowed down. It found the contracts to build the stations, which have not yet been signed, were already a year behind schedule.
The report detailed how the Department of Premier and Cabinet warned of cost blowouts up to $1 billion if the first contract was not finalised by the caretaker period before the election.
Efforts to rein in costs in 2024 by slowing down project spending had also increased the risk of blowouts, the auditor-general found, and contractors lifted their prices due to “potential changes in the state’s requirements for the timing of project spending”.
Wilson has repeatedly cast doubt on the project’s total cost estimate of $34.5 billion, announced in 2020, because of blowouts on other projects and inflation as high as 20 per cent across the construction sector since then.
“The only responsible thing to do for an incoming government that has no visibility of the contracts that have been signed is to pause this project to make sure we do a review that is swift,” she told The Age’s Melbourne Assembly earlier this month.
“Then we make a decision in the best interest of Victorians, taking into account the contractual arrangements, the financing arrangements, and of course, the construction at that point in time.”
On Friday, the Victorian economic and fiscal update, details of which were provided to The Age before its publication in full, will show operating surpluses of $300 million in 2026-27 and 2027-28, growing to $400 million annually in the following financial years. This is a decline from forecasts in the May budget, which projected surpluses starting at $1 billion and rising to $2 billion by 2030.
One factor behind the decline is tax revenue – driven by a downturn in the state’s property market – falling $1.3 billion annually on average over the next four years. Despite this, net debt will be $2.3 billion lower than forecast in 2030 and is now expected to reach $197 billion.
The state government will claim this reduced debt, and the preservation of operating surpluses, shows efforts to reduce spending have been working since Carroll became premier.
“We have a new premier going in a new direction,” Treasurer Colin Brooks said. “Because of our commonsense decisions, the budget will remain in surplus for the next four years.”
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